Thinking of becoming somebody’s parent? It’s probably one of the most expensive decisions you’ll ever make. But totally worth it. (Right, Mom?) We’re breaking down exactly how your income will be affected and offering tips on how to squeeze extra expenses into your life.
Get the facts
Just how much will your income be reduced when you’re on maternity or parental leave? Here’s the math! Mothers can receive up to 50 weeks of government benefits if their income has been reduced by at least 40 per cent after having a baby. Fifteen weeks of that is employment insurance (EI) maternity benefits and 35 weeks is EI parental benefits, which either parent is eligible for. For 2014, the maximum weekly benefit is $514. Benefits are calculated based on income.
The basic rate is 55 per cent of weekly earnings, up to a maximum of $48,600. All benefits paid are taxable. To be eligible, you must have worked 600 insurable hours in the year before you claim parental leave benefits. Some employers top up EI benefits for a period of time, while others do not. Either way, employers are required to accept the employees back at their jobs or equivalent positions at the end of the leave at the same rate of pay and the same employment benefits.
Babycenter.ca provides some great information about parental leave and EI that will help you determine exactly how much your income will be reduced and what other benefits you may be eligible for. According to Babycenter.com, you will spend about $10,000 in your baby’s first year. (Do your own calculations here.) Yikes!
However you work out maternity and parental leave, your income as you know it will also take a hit in the first year of your baby’s life. (Get used to it. Financing child care, particularly in Toronto, is a whole other story.) Start preparing for these changes as far in advance as possible.
Here are some tips to help keep extra cash in your pocket when you need it most.
Before or during pregnancy, start putting aside money every month to build a maternity leave “nest egg” that you can draw from to top up your employment insurance benefits while you’re away from work. If you don’t need it while you’re on leave, you’re sure going to need it for daycare, so build it up as much as you can.
Babies have a way of naturally weaning you from expensive habits (high-end restaurants, cocktails, sports cars), but it wouldn’t hurt to take a good hard look at your spending habits ahead of time and determine what else could save money now and in the future.
Call up the service providers for your cable, cell phone, internet, home phone, and other services with whom you might be able to negotiate a better rate. Carrying a balance on your credit card? See if you can consolidate a few cards or at least get a better interest rate.
Got any pricey furniture, collectibles, bicycles or other items you don’t use anymore? Hop on Craigslist or Kijiji and sell them to a good home. Not only will you make a bit of extra cash for the maternity leave fund, you’ll also be making room for a baby at home.
While you’re in selling mode, browse through the online classifieds for gently used baby items, such as a crib, stroller, high chair, and clothing. You’d be surprised at what you can score for a much cheaper price than buying brand new. Plus, Toronto has a ton of gently used children’s stores, such as Once Upon a Child, Bumbleberry Kids, and Boomerang Kids.